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How to start your own taxi business in India?

The taxi or cab market in India has become so competitive and attractive that a majority of people prefer leaving their cars at home and use a taxi. As the fuel prices have been rising, there is always a shortage of public transportation. Getting into this sector is a good idea, considering that it is a typically vendor-driven market and doesn’t have huge entry barriers.

So here are some points that you should keep in mind while setting up a taxi business.

What is the Market Scope?

Though, there are hundreds of players in the market, the good news is that this sector is welcoming to the newcomers. But before stepping in, you must make sure that you have something new to offer or have a niche and come up with a robust value proposition. Data shows that the taxi fares have gone up by 25% in the recent past in India. And the business scope is more profitable in the urban areas as compared to rural or semi-urban areas.

What all do you need?

You could think of hiring or leasing some cabs or taxis first. Then think of hiring some good and trained drivers or you could engage some drivers who already own taxis on a percentage basis. In this business, you do not need a big office space. But you do need an open space to park your taxis. You also require a software package that can manage the cab bookings and other functions besides a customer service person and some basic administration staff.

How to calculate your Return on Investment?

Let’s take an example. For hiring a space to park your cabs, you need to spend a big amount, say about one lakh per month. You would also need about 4-5 lakhs for other miscellaneous expenses while you are starting up besides about a lakh of working capital. In case you are giving a salary to the drivers, you could break even within a year. But in case of giving them a percentage from the profits, it could take longer time to break even; however, it would increase your profitability in the long term.

At what rate can you expect to grow?

Excellent service is what you need to survive and grow in this ever-competitive industry. You can plan to increase your market share by about 40% in the first three years. You have to think of ways to reach the customer base and thus gain a good share of the market. But that’s not enough. Retaining these customers and also keeping them happy is the key to big profits. If you can pull up and sustain your customers, you can be rest assured of a 70% growth in the first couple of years. Now this also depends largely upon your customer service, what’s your brand value and services. Even one bad incident can put everything on stake within a few minutes. Other factors you need to take care of are your niche, type and number of taxis you have, your business model, etc.

How to attract a bigger client base?

The need for travel is huge, which means there is no dearth of customers. But just targeting individual clients would not increase your profits. You should think of collaborating with some corporate or companies to increase your customers and work. You could also consider providing some value-added services like free coupons, free miles or have some lady drivers to make female customers comfortable.

Some important points to keep in mind:

  1. Initially you should not get into the price war.
  2. Don’t expect too much revenue in the first year. It’s important to first break even and then you will spiral to the growth track.
  3. Focus on gaining at least 40-50 loyal customers within a year.
  4. Focus on servicing tier I and tier II areas to get a three-digit growth rate.
  5. Advertise about your business well and on all platforms.
  6. It’s important to have online booking services and also mobile apps to attract tech-savvy customers.
  7. Decide a niche or have a particular type of cabs.
  8. Run your taxis on CNG and contribute your bit towards the environment.
  9. Apply for a business permit before starting the operations of your taxi business in India.
  10. It’s a good idea to get in touch with some local government agency to find out about legal requirements that are necessary to start a taxi business in India.

Though this is a mature sector, there surely are some unexplored areas in this market. Work out a business model, which would fit that bill and then there’s nothing to stop your growth.

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